The Federal Deposit Insurance Corp. is urging consumers to be wary of those so-called "convenience checks" that arrive with your credit card statements.
You know them: the blank checks conveniently printed with your name and touted as a way to write yourself a little loan, pay off an extra bill or splurge on a little extra spending.
While oh-so-tempting, those "convenience" checks carry some risks.
"It's not just a way to write yourself money," said Luke W. Reynolds, the FDIC's community outreach chief in Washington. "It's like any other credit card transaction. You're essentially borrowing money (against your credit card) ... that has to be repaid."
And the cost can be fairly significant.
Every time you write a convenience check, it's treated just like a "cash advance" on your credit card. That means there's a transaction fee, usually a percentage of the check amount. So if it's a 5 percent fee and you write a $1,000 convenience check, you'll pay $50 just for the privilege of signing your name.
You'll also be hit with hefty interest rates, as much as double the normal annual percentage rate, or APR, on your credit card.
Reynolds also advised being aware of:
-- Hidden costs. Convenience checks can trigger overdraft fees if you deposit them into your checking account and have exceeded the cash advance limit on your credit card. You can also run into trouble if you write convenience checks to pay a utility bill or a boutique -- and then discover the retailer doesn't accept them. In those cases, you could be hit with returned-check fees from other banks and over-limit fees from your credit card issuer.
-- Less protection. When you make a credit card purchase, you have some protections granted by the Fair Credit Billing Act, such as refunds for defective merchandise. Not so when you pay with a convenience check, even though it's tied to your credit card.
-- No bonus points. When using convenience checks, you typically don't earn the points and other perks that rack up on rewards-based credit cards. In other words, don't think you're earning airline miles on your Southwest Visa card when you write a convenience check.
If you don't plan to use the checks, run them through a shredder. The FDIC says the blank checks could be tempting to dishonest friends, relatives or workers in your home.
Better yet, call your credit card company and request they stop sending the blank checks. Not only is it saving paper, but you're eliminating the financial temptation to yourself -- or anyone else.
(E-mail Claudia Buck at cbuck(at)sacbee.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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